Sir John Kingman has launched a two-month long call for evidence as part of his independent review of the Financial Reporting Council (FRC), which will examine the regulator’s role, impact and effectiveness, powers, governance and leadership
The call for evidence invites views from those affected by the FRC’s functions and its effectiveness, including the organisations and companies that fund the regulator; professional bodies; and accountants and auditors.
Kingman states the review will be ‘ambitious and, if necessary, far-reaching’, and says the key question is whether the current regulator, and the regulatory structure, are as effective as they need to be in current circumstances and for the future.
As well as reviewing the FRC, its structure, governance, powers and resourcing, this will include examining whether or not the FRC is, as was charged in the recent select committee report on Carillion, ‘chronically passive’, ‘timid’ and requiring culture change.
The review will also consider whether or not the FRC is too slow, insufficiently proactive, and whether its actions have sufficient deterrent effect; and whether or not it is too close to, or unwilling to challenge, the Big Four.
It is seeking evidence on the FRC’s purpose and function, with questions on its objectives, whether its present mission statement and name are right, and whether its functions and structure are relevant. The review asks if some of the FRC’s function should move to other regulators, and what lessons can be learned from other countries’ regulatory systems.
As regards the FRC’s impact and effectiveness, the review asks questions about how effective it is in driving quality improvements in audit, and whether the FRC’s work should promote competition and a well-functioning audit market, given changing expectations in this area.
There are also questions about whether the FRC has been effective in influencing the development of accounting standards internationally as well as accountable and effective in setting UK GAAP, and whether the current combination of statutory and voluntary methods of oversight for professional bodies is effective.
On the question of corporate failure the review asks if there is more the FRC could or should do to help reduce risks and whether it is quick and effective enough to act on warning signs arising from its work on accounts and financial reporting, or on evidence of concerns over poor corporate governance.
It also looks at the regulator’s powers and sanctions, as well as its legal status and its relationship with government.
The Kingman review is supported by an advisory group, which is responsible for scrutinising and challenging its findings and recommendations, as well as advising on the direction of the review and its sources of evidence.
Sir John Kingman said: ‘The FRC’s work is critical to financial markets, the economy and public confidence. Trust, quality and credibility are the questions at the heart of today’s consultation.
The review wants to hear the widest possible range of views on how the regulatory system can best deliver for the future.’
Sir Win Bischoff, Chairman of the FRC said: 'We welcome this independent review of the FRC’s governance, impact and powers. It is an opportunity to assess our past and our future. The Board is determined to meet public expectations and support UK business in attracting global investment for the long term.
'We hope interested stakeholders will respond to Sir John Kingman’s call for evidence.'
The call for evidence closes on 6 August.
Report by Pat Sweet